2016 Philanthropy Trends: Americans Donate Record $373 Billion

It's that time of year when mailboxes are full of letters from charities asking for money. And people are also giving so they can take that end-of-year charitable tax deduction. And according to the latest figures, Americans gave a record $373 billion to charities last year. We're going to talk more about this with Chuck Collins. He's with the Institute for Policy Studies, and he has a new report that takes a close look at who is doing the giving.

Thanks so much for joining us.

CHUCK COLLINS: Thanks, Ailsa. Great to be with you.

CHANG: So Americans are giving away nearly $400 billion to charity. That sounds phenomenal to me. What's the problem with that?

COLLINS: Well, it is good news. And it's up, like, 10 percent in the last two years. But what it does is it masks a little bit of a troubling trend, which is a lot of the growth in giving is coming from very wealthy donors and their foundations. And there's a decline of low and middle-income givers over the last 10 years, almost a 25 percent steady decline. So put those two things together, and we're seeing what we call a top-heavy philanthropy sector emerging.

CHANG: Why is top-heavy giving bad?

COLLINS: Well, you know, when I first did fundraising, there used to be a rule of thumb. They called it the 80-20 rule, which was that 80 percent of your donations would come from 20 percent of your donors. We are now kind of moving toward, like, a 98-2 percent, you know, where 98 percent of your money comes from 2 percent of your donors. So that means there's more volatility and unpredictability for the independent sector. It means that they're thinking about oh, how do we cater and maintain and get those big donors? And it could lead to the risk of mission drift, meaning those big donors have a lot of say and a lot of power with the nonprofit organizations. And they may be saying, well, this is what I'm interested in, and those organizations start to morph their missions.

CHANG: I'm just thinking about back to the days of the Vanderbilts and Carnegies and Rockefellers, sort of, you know, those very, very rich people donating. Was it different than it is now in terms of the causes that were supported, the buildings that were built in their names?

COLLINS: The first Gilded Age 100 years ago plus, we have benefited from that - the Rockefeller investments in public health, Carnegie's libraries that are in a lot of our towns. Then we - you know, really over the last century, we've seen the rise of mass giving, a broader set of stakeholders helping lift up this vibrant independent sector we have. And that's my concern, is we're sort of going back in the - toward the Gilded Age again. And I think one really important thing to remember, though, is that philanthropy is not a substitute for an adequately funded tax system in a public sector. You and I have a stake in this because every time a billionaire gives money to a foundation, you and I are chipping in 40 to 50 cents in the form of lost tax revenue.

CHANG: I get that we lose tax revenue if the mega-rich move chunks of their money into charities. But isn't the tradeoff then that causes or arts, organizations are being funded in places where the government isn't willing to fund?

COLLINS: Taxes and philanthropy pay for different things. Like, I was recently in New Haven, and there's, you know, this huge nonprofit tax-exempt building boom around Yale. You know, they're - you know, they're running out of projects to put wealthy people's names on. You walk three blocks away and look at the public infrastructure in New Haven around the Yale campus, and you'll see, you know, deteriorating streets and public infrastructure. So charity does a good job building hospitals, educational institutions, but it's not a substitute - you know, no foundation is funding to address the the water infrastructure problem in Flint. Only federal and state taxpayer-funded projects can really address some of those deeper needs.

CHANG: So what would you do? How would you discourage wealthy people from siphoning off their assets into charities and instead reroute it into our tax system?

COLLINS: One possible reform is we create an annual cap on the amount of money that can be given while taking a charitable deduction. People can give all they want, but the question is should we as taxpayers subsidize that up to a certain amount? So we could cap the deduction at, say, $200,000 a year, which is something that Donald Trump has said he wants to explore. So that would actually create an incentive to give to charity, but also to not avoid paying taxes.

CHANG: Chuck Collins is with the Institute for Policy Studies. Thanks so much for joining us.